Canada, the Accidental Tax Haven

Is Canada a tax haven? You could be forgiven for asking the question after hearing that Burger King, founded in Miami in 1954, plans to move its headquarters north of the border as part of its purchase of Tim Horton’s, the Ontario-based coffee and doughnut chain. Burger King insists its deal isn’t tax-motivated.

Valeant Pharmaceuticals, formerly of California, became Canadian in a 2010 deal; a second drug company, Auxilium, is in the middle of doing so now, a process known as an inversion. Tim Horton’s, a Canadian icon, did its own inversion in 2009: It repatriated to Canada after the end of its decade-long marriage with Wendy’s, which had left it with a U.S. corporate address.

Canada is hardly a low-tax nation. Its overall tax burden is about 30 percent of gross domestic product, higher than the U.S.’s 24 percent rate. But that figure includes personal income taxes and other levies that don’t apply to corporations.

Over the past two decades, many developed countries have either lowered corporate income taxes, stopped taxing foreign profits, or both. The U.S., whose 35 percent rate is now the highest in the developed world, is an increasingly lonely holdout. That’s why, from Miami, the whole world is starting to look like a tax haven.

Source: Business Week

Attorney Colin Singer Commentary:

Canada has experienced a reduction in corporate taxation rates and in theory this should attract foreign investment. However, the Tory government’s immigration policies towards business investors have become very restrictive.